This paper investigates the exposure to systemic risk of “too-bigto- fail” banks. Using a sample of top ten European banks by total assets at the debut of the most recent financial crisis we assess the contagion effects during 2008-2010 by employing the Conditional Value at Risk methodology. Empirical results suggest an intensification of banks’ exposure to systemic risk during the crisis period. The vulnerability to systemic events is significantly and positively associated with higher long term government bonds yields and lower interbank offered rates for unsecured lending transactions.
If the inline PDF is not rendering correctly, you can download the PDF file here.
1. Adrian T. Brunnermeier M. 2011. CoVaR. Federal Reserve Bank of New York Working Paper Staff Report 348.
2. Allen F. Gale D. 1998. Optimal Financial Crises. Journal of Finance 53(4): 1245-1284.
3. Allen F. Gale D. 2000. Financial Contagion. Journal of Political Economy 108(1): 1-33.
4. Andries A.M. Cocris V. Ursu S. 2012. Determinants of Bank Performance in CEE Countries Review of Economic and Business Studies 5(2): 165 - 178.
5. Andrieș A.M. Cocriș V. Plescau I. 2015. Low interest rates and bank risk-taking. Has the crisis changed anything? Review of Economic and Business Studies 8(1): 127 -150.
6. Basel Committee on Banking Supervision and Financial Stability Board 2014. 2014 update of list of Global Systemically Important Banks (G-SIBs). Available online at: http://www.financialstabilityboard.org/wp-content/uploads/r_141106b.pdf
7. Bhattacharya S. Fulghieri P. 1994. Uncertain Liquidity and Interbank Contracting. Economics Letters 44: 287-294.
8. Bhattacharya S. Gale D. 1987. Preference Shocks Liquidity and Central Bank Policy. New approaches to monetary economics Ed. W. Barnett and K. Singleton. Cambridge: Cambridge University Press.
9. Chen Y. 1999. Banking Panics: The Role of the First-come First-served Rule and Information Externalities. Journal of Political Economy 107(5): 946-968.
10. Diamond D.V. Dybvig P. 1983. Bank Runs Deposit Insurance and Liquidity. Journal of Political Economy 91(3): 401-419.
11. European Banking Authority 2014. Global Systemically Important Institutions (GSIIs). Available online at: https://www.eba.europa.eu/risk-analysis-and-data/globalsystemically-important-institutions
12. Freixas X. Parigi B. Rochet J.C. 2000. Systemic Risk Interbank Relations and Liquidity Provision by the Central Bank. Journal of Money Credit and Banking 32(3/2): 611-640.
13. Holthausen C. Rønde T. 2002. Regulating Access to International Large-Value Payment Systems. Review of Financial Studies 15: 1561-1586.
14. IMF 2008. Global Financial Stability Report: Containing Systemic Risks and Restoring Financial Soundness. Available online at: https://www.imf.org/External/Pubs/FT/GFSR/2008/01/pdf/text.pdf
15. Jacklin C. Bhattacharya S. 1988. Distinguishing Panics and Information-based Runs: Welfare and Policy Implications. Journal of Political Economy 96(3): 568-592.
16. Koenker R. Bassett G. S. 1978. Regression Quantiles. Econometrica 46: 33-50.
17.Rochet J.C. Vives X. 2004. Coordination Failures and the Lender of Last Resort: Was Bagehot Right after all? Journal of the European Economic Association 2 (6): 1116-1147.
18.Rochet J.C. Tirole J. 1996a. Interbank Lending and Systemic Risk. Journal of Money Credit and Banking 28(4): 733-762.
19.Rochet J.C. Tirole J. 1996b. Controlling Risk in Payment Systems. Journal of Money Credit and Banking 28(4): 832-862.